FarmPolicy

March 27, 2015

Bird Flu Issues

Samantha Masunaga reported late last week at the Los Angeles Times Online that, “A ‘limited number’ of turkeys at Butterball contract farms in Missouri and Arkansas have been diagnosed with H5N2 avian influenza, a Butterball spokeswoman said.”

Reuters writer Tom Polansek reported on Saturday that, “The U.S. Department of Agriculture has identified the first infection of a virulent strain of avian flu in poultry in Kansas, confirming the virus has spread into a migratory bird route that runs through the center of the country.

“The discovery of the H5N2 flu strain in a backyard chicken and duck flock in a county just outside Kansas City, Kan., is certain to lead to expanded restrictions on U.S. poultry exports from top trading partners like Mexico and Canada.

“The infection, confirmed on Friday by the U.S. Department of Agriculture, was the first case in an established migratory bird route, known as the central flyway, that stretches roughly north-south from Montana to Texas.”

The article noted that, “Major buyers of U.S. poultry have already restricted imports from other states that have recently been infected with the same flu strain.”

AP writer Steve Karnowski reported on Saturday that, “Animal health experts and poultry growers are scrambling to determine how a dangerous new strain of bird flu infected poultry flocks in four states — and to stop it from spreading.

“Avian influenza is common in wild migratory waterfowl but doesn’t usually harm them. But the H5N2 strain is deadly when it spreads to commercial poultry. It can wipe out a flock of tens of thousands of birds in a few days, as it did at a farm last month in Minnesota, the nation’s top turkey-producing state. The same strain soon turned up on two farms in Missouri and one in Arkansas.

The vast majority of turkeys and chickens in the U.S. spend their lives confined indoors to protect against disease. Yet, as the infections show, viruses can still reach them — tracked in by humans or rodents; carried on trucks, equipment, crates and egg flats; passed from waterfowl to shore birds that find their way into a barn.”

The AP article noted that, “Minnesota confirmed its outbreak March 4, the first H5N2 found in the Mississippi flyway, a major bird migration route. The Missouri and Arkansas cases were confirmed this week. The only known commonality among those states is the flyway. Meanwhile, samples from a Kansas backyard flock of chickens and ducks tested positive for the strain late this week; the affected flock is in a county just west of the Mississippi flyway.

Why it showed up at these locations simultaneously is a mystery, though [Dr. Carol Cardona, an avian influenza specialist at the University of Minnesota] and other experts suspect waterfowl or other wild birds. Meanwhile, officials are keeping an eye on the workers who had contact with the infected flocks, and producers are tightening their standard biosecurity measures, which include putting on sanitary clothing and showering on their way in and out of barns.”

Saturday’s AP article also pointed out that, “Some countries also use those bans to protect their markets from cheaper foreign products, according to Dr. Donna Carver, extension veterinarian at North Carolina State University. ‘There’s not always a scientific reason,’ she said.”

A news release on Friday from the National Chicken Council stated that, “In light of the recent detections of avian influenza (AI) in the United States, the U.S. poultry industry would like to assure the public that detailed response plans are in place for controlling the spread of the virus and for eliminating the virus entirely. The U.S. government and poultry industries have sophisticated systems and techniques to detect the introduction of the virus into a commercial poultry flock and have proven methods to quickly eliminate the virus. The U.S. poultry industry has a strong avian influenza testing and detection program administered by the federal National Poultry Improvement Plan, in addition to each state’s individual response plan. Poultry farmers also maintain strict biosecurity measures year-round, keep their flocks protected from wild birds and routinely test flocks for avian influenza.”

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California Drought- Problems Persist

Discouraging news regarding the ongoing California drought continues to persist.

Jay Famiglietti, a senior water scientist at the NASA Jet Propulsion Laboratory/Caltech, and a professor of Earth system science at UC Irvine, penned a sobering column this week on California water issues in the Los Angeles Times.

Dr. Famiglietti indicated that, “As our ‘wet’ season draws to a close, it is clear that the paltry rain and snowfall have done almost nothing to alleviate epic drought conditions. January was the driest in California since record-keeping began in 1895. Groundwater and snowpack levels are at all-time lows. We’re not just up a creek without a paddle in California, we’re losing the creek too.”

Statewide, we’ve been dropping more than 12 million acre-feet of total water yearly since 2011. Roughly two-thirds of these losses are attributable to groundwater pumping for agricultural irrigation in the Central Valley. Farmers have little choice but to pump more groundwater during droughts, especially when their surface water allocations have been slashed 80% to 100%. But these pumping rates are excessive and unsustainable. Wells are running dry. In some areas of the Central Valley, the land is sinking by one foot or more per year.

As difficult as it may be to face, the simple fact is that California is running out of water — and the problem started before our current drought. NASA data reveal that total water storage in California has been in steady decline since at least 2002, when satellite-based monitoring began, although groundwater depletion has been going on since the early 20th century,” Dr. Famiglietti said.

The LA Times column stated that, “Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain.

In short, we have no paddle to navigate this crisis.”

The column went on to outline potential policies that could be implemented to deal with the current situation.

To view a brief Weather Channel video on the California winter snow pack, just click here.

And drought is also having an impact on Washington state.

Maria L. La Ganga reported in Saturday’s Los Angeles Times that, “‘What we’re experiencing is essentially a snowpack drought,’ Maia Bellon, director of the state Department of Ecology, told reporters Friday. ‘As of this very moment, the projected snowpack is 4% of normal in the Olympic Mountains.’

“In the Central Cascades, snowpack is 8% to 45% of normal, and in the Walla Walla area, it’s 67% of normal. The long-range forecast calls for drier, warmer weather, Bellon said, and ‘conditions are expected to get worse.’

“A statewide drought has not been declared in Washington since 2005, but the perilous snow levels mean other parts of the state are being monitored in case the emergency declaration must be broadened.”

The article pointed out that, “To get ready for a long, hot summer, officials have requested $9 million in drought relief funds from the state Legislature and are prepared to make temporary changes to water rights so that crops and fish have an adequate water supply.”

And the National Oceanic and Atmospheric Administration (NOAA) recently indicated that, “The continued availability of irrigation for crops and landscaping is also vulnerable to climate change, particularly in the Southwest where irrigation accounts for the highest volume of water used. Projected increases in temperature and potential evapotranspiration, accompanied by decreases in soil moisture, will challenge this already-dry area with increased demand for water. Demand for water will also grow with population, as people migrate to Sun Belt states for better weather.”

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Friday Morning Update: Budget; Appropriations Hearing; Animal Production Issues; and, Trade

Budget

An update on Thursday evening at FarmPolicy.com explored recent budget related developments that could potentially have significant implications for the Farm Bill- the update can be viewed here: “Budget Issues Move to the Front Burner- Potential Farm Bill Implications.”

 

Appropriations Hearing

On Thursday, the Senate Appropriations Subcommittee on Agriculture heard testimony from FDA Commissioner Dr. Margaret Hamburg.

During the discussion portion of the hearing, a couple of Senators sought more detail and perspective about the FDA’s role as it relates to the recent Dietary Guidelines Advisory Committee Report- additional details on the hearing and the Dietary Guidelines report have been posted here, at FarmPolicy.com.

 

Animal Production Issues

In other news, Lisa Baertlein and P.J. Huffstutter reported yesterday that, “KFC, the world’s largest chain of fried chicken restaurants, may face pressure from consumer and environmental groups to change how its poultry are raised after McDonald’s Corp said it would switch to chicken raised without human antibiotics.

“McDonald’s will phase out chicken raised with antibiotics that are important to human health over two years to allay concern that use of the drugs in meat production has exacerbated the rise of deadly ‘superbugs’ that resist treatment, Reuters reported last week. Within days, retailer Costco Wholesale Corp told Reuters it aims to eliminate the sale of chicken and meat raised with human antibiotics.

KFC is owned by Louisville, Kentucky-based Yum Brands Inc, which has no publicly stated policy on antibiotic use in the production of meat it buys. Chick-fil-A, another chicken restaurant chain that competes with KFC, says about 20 percent of the chicken it serves is raised without any antibiotics, and that its entire supply chain will be converted by 2019.”

Also, a news release this week from Cargill indicated that, “Dr. Stephanie Cottee joins Cargill animal welfare team with global responsibility for poultry.

“She will be based in Guelph, Ontario, Canada and report to Dr. Mike Siemens, PhD, Cargill’s head of animal welfare based in Wichita, Kan. Dr. Cottee’s appointment is effective immediately.”

And Reuters writers Tom Polansek and P.J. Huffstutter reported yesterday that, “A case of bird flu confirmed Wednesday in the heart of America’s poultry region, is certain to mean more export restrictions, increasing U.S. supply and likely forcing the world’s biggest poultry companies to trim prices.”

The article noted that, “The USA Poultry & Egg Export Council said it expects 30 to 40 additional countries to impose new trade restrictions on U.S. poultry and eggs in the $5.7 billion export market. Additional limits could come from Mexico, the top U.S. chicken importer, which already is blocking poultry imports from Minnesota, Missouri and California due to bird flu, the trade group said.

“Previous cases of avian flu in other states triggered China and South Korea to recently impose bans, still in effect, on U.S. poultry imports. Last year, they accounted for about $428.5 million in export sales of poultry meat and products, according to U.S. Department of Agriculture data.

“Other countries have banned exports from only states or counties with positive cases of avian flu.”

See also this update yesterday from Kansas State University Extension, “Poultry bans by overseas buyers could weigh on pork and beef, as well as poultry prices.”

 

Trade

Chris Kirkham reported yesterday at the Los Angeles Times Online that, “The short-term economic impact of the recent labor standoff at West Coast ports will be small, according to a new economic forecast, but the ports face a long-term struggle to remain competitive in the rapidly changing realm of global trade.

Many businesses in California, particularly those tied to agriculture, suffered from missed orders and produce spoiling on docks. But many other shipments were simply delayed rather than lost entirely, according to the quarterly UCLA Anderson Forecast.”

And Ann M. Veneman and Dan Glickman, who respectively served as Agriculture Secretary for George W. Bush and Bill Clinton, indicated in a column this week at The Hill Online that, “As former secretaries of Agriculture, we know firsthand the importance of international trade to America’s farm and ranch families, to our nation’s rural communities, and to the U.S. economy as a whole. There’s no other sector of the U.S. economy where the link between trade and prosperity is clearer than in agriculture.”

The column noted that, “Key to our ability to negotiate and implement market-opening agreements has been enactment of trade negotiating authority. This authority, now called trade promotion authority (TPA), ensures U.S. credibility to conclude the best deal possible at the negotiating table. TPA also ensures common negotiating objectives between the president and Congress, and a continuous consultation process prior to final Congressional approval or disapproval of a trade agreement.

That’s why we, together with all living former secretaries of Agriculture, recently signed an open letter urging Congress to reinstate Trade Promotion Authority to allow the president to effectively negotiate job-supporting trade agreements as other presidents have done.

“With TPA, the United States will be able to pursue trade agreements that support high-paying U.S. jobs while helping America’s farmers and ranchers increase U.S. exports and compete in a highly aggressive globalized economy. TPA will signal to our TPP partners that Congress and the administration stand together on the high standards our negotiators are seeking.”

Keith Good

Senate Appropriations Ag Subcommittee Hearing, Dietary Guidelines

Categories: Budget /Nutrition

On Thursday, the Senate Appropriations Subcommittee on Agriculture heard testimony from FDA Commissioner Dr. Margaret Hamburg.

In his opening statement, Subcommittee Chairman Jerry Moran (R., Kan.) noted that, “Over the past four years, FDA has been given significant new responsibilities through the Food Safety Modernization Act, menu labeling legislation, and drug compounding legislation.

When implementing these laws, FDA must avoid the trappings of ‘one-size-fits-all’ solutions. Small businesses suffer under this practice all too frequently because they have limited capital to respond to significant new requirements and little time to implement these changes.”

Chairman Moran added that, “The agency’s final rule on menu labeling is overly broad and inflexible and lacks a great deal of business practicality. I was disappointed to see the inclusion of grocery stores, convenience stores, and other entities that do not sell restaurant style food as their primary business.

“Under the Food Safety Modernization Act, FDA is tasked with implementing the most sweeping changes to food safety laws in over 70 years. I was pleased that the Agency took many of the concerns within the agricultural community into account by re-proposing significant portions of the rules because they were unworkable for farmers. With the court-mandated deadlines for finalization approaching, I encourage FDA to consider deliberate and thoughtful implementation of the law.”

A news release on Thursday from Sen. Jon Tester (D., Mont.) indicated that, “During a Senate Agriculture Appropriations hearing Tester called on the Food and Drug Administration (FDA) to better identify the ingredients that are in food. With the commitment that the FDA would improve food safety without burdening small producers, Tester voiced his support for the $300 million increase for food safety included in the Administration’s budget request.

“‘Folks deserve to know what ingredients are in their food-which ingredients are good for them and which are going to kill them,’ Tester told FDA Commissioner Dr. Margaret Hamburg. ‘I want to support your efforts to keep our food safe, but we need to do it in a way that meets the needs of producers and consumers.’”

During the discussion portion of yesterday’s hearing, Chairman Moran had the following exchange with Dr. Hamburg about the 2015 Dietary Guidelines Advisory Committee Report:  “In regard to dietary guidelines, what role will FDA have in advising the Department of Health & Human Services?”

Dr. Margaret Hamburg: “Well, the dietary guidelines, at least as I understand it, it is a process that ultimately involves decision-making that is coordinated between the Secretary of Health & Human Services and the Secretary of the Department of Agriculture of USDA. FDA does play a role in reviewing reports and information that goes into the final determinations, and we of course bring our science-based approaches to our recommendations in terms of nutrition science and health.”

Sen. Moran: “What’s the status of that process now at the Department of Health & Human Services and your role?”

Dr. Hamburg: “I believe that there’s a report that is currently under review that was developed by a group of outside scientific experts, and we, like other components of HHS, have been asked to review that report and make comments for the Secretary.”

And Montana GOP Sen. Steve Daines had the following exchange with Dr. Hamburg on the Dietary Guidelines issue: “As you know, Montana is a large producer in ag. It’s our number one industry, $5 billion a year, and maintaining a high quality food supply is of paramount importance for our producers. And Montana agriculture plays an important role in the diets of Montanans, for Americans across the country, and even around the world.

And a question I had really relates to some of the dietary guidelines. And specifically, in the FY15 omnibus, there was a congressional directive that expressed concern that the Advisory Committee was, quote, ‘showing an interest in incorporating environmental factors into their criteria,’ and directed the Secretary to include, and I quote, ‘only nutrition and dietary information, not extraneous factors in the final guidelines.’

“Well, as you know, the scientific report of the 2015 dietary guidelines advisory committees was just released last month. It included, and I quote, ‘environmental approaches are needed to complement individual based efforts to improve diet and reduce obesity and other diet related diseases.’ So the question I have is, do you think the advisory committee report is compliant with the congressional directive?”

Dr. Hamburg: “Well, as I think you probably know, our role in this is not a direct one, but it’s advisory to the Secretary of Health & Human Services in terms of reviewing materials, including the report you mentioned, that then become the basis for decision-making by the Secretary of HHS and the Secretary of the Department of Agriculture. Our role is really to provide feedback in terms of the science of nutrition and health.

“And the broader issues that you were referring to I think were reflected in a report that was done by an outside group of scientists, but in terms of what we’ll be commenting on to the Secretary of Health & Human Services will be on nutrition science and health. And I think that, you know, my understanding is that, you know, at the end of the day the decisions that are made will really focus on the dietary guidelines that are science [based]—”

Sen. Daines:Doctor, do you believe the environmental issues are within the purview of developing those dietary guidelines?”

Dr. Hamburg:Well, you know, from the FDA perspective, as I said, that is not something that we are looking at. And my understanding is that the Secretary of Agriculture and the Secretary of Health & Human Services understand their role in terms of establishing the dietary guidelines.”

Sen. Daines: “Okay.”

Also on Thursday, a news release from Chairman Moran noted that, “Today, [Sen. Moran] and 29 of his Senate colleagues called on U.S. Department of Agriculture (USDA) Secretary Tom Vilsack and U.S. Department of Health and Human Services (HHS) Secretary Sylvia Burwell to stay within statutory guidelines, consider the most relevant nutrition scientific literature, and reject the committee’s inconsistent conclusions and recommendations regarding the role of lean red meat in a healthy diet.

In a letter led by U.S. Senator John Thune (R-S.D.), they request an extension of the 45-day comment period to ensure stakeholders have enough time to review and comment on the lengthy report.”

Lydia Wheeler reported on Thursday at The Hill Online that, “The North American Meat Institute has a message for the Dietary Guidelines Advisory Committee – ‘Get your hands off my hot dog.’

“The meat and poultry trade association is calling all hot dog, sausage, bacon and salami lovers to sign a petition on change.org, which asks the Departments of Agriculture and Health and Human Services to include meat as part of a healthy diet in the 2015 Dietary Guidelines for Americans.”

Note that Dr. Hamburg was also asked about the Dietary Guidelines at House Appropriations Ag Subcommittee hearing earlier this month- details on that hearing can be found here.

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Budget Issues Move to the Front Burner- Potential Farm Bill Implications

Categories: Budget /Farm Bill

Kristina Peterson reported on Thursday evening at The Wall Street Journal Online that, “The Senate Republican budget slated for release next week is expected to generate savings by turning more responsibility for Medicaid and food-stamp programs over to states, GOP lawmakers and aides said Thursday.

“While details of the document aren’t final, Republicans would propose turning funding for those programs into something similar to a block grant, said Senate Budget Committee Member Lindsey Graham (R., S.C.). That approach would call for the federal government to pay states a lump sum, instead of a percentage of the program’s costs. States would have more control over the program and would be responsible for footing the rest of the bill.”

Ms. Peterson explained that, “To get a sense of potential savings, under last year’s House GOP budget, converting the food-stamp programs into a block grant starting in 2019 would have saved $125 billion over 10 years.”

The Journal article added that, “Not all Republicans support the idea of turning food stamps into a block grant-type program.

“‘The governors would love the money, but they don’t want to be in charge of food stamps,’ said Sen. Pat Roberts (R., Kansas), the Agriculture Committee chairman.”

Recall that President Obama released the executive branch budget outline in February.  With respect to SNAP, Alan Bjerga reported at the time that, “The biggest spending item in the USDA budget, the Supplemental Nutrition Assistance Program, which distributes food stamps, would decline 0.1 percent to $78.7 billion.”

In other areas of the President’s budget, DTN writers Chris Clayton and Todd Neeley explained back in February that, “‘The White House budget proposal for 2016 seeks to cut crop insurance under the argument that such cuts are needed to offset higher projected direct farm-program subsidies.”

The DTN article explained that, “The crop-insurance cut is smaller than in earlier budget proposals, but it would take an average of $1.6 billion a year out of crop insurance, or $16 billion over the next decade. Agriculture Secretary Tom Vilsack said in a discussion Monday [Feb. 2] with reporters that the crop-insurance proposal was a way to help keep projected farm-bill savings on track.

“Vilsack said one of the challenges of passing the farm bill was how to create sufficient savings. Lower commodity prices indicate higher spending for the new commodity programs — Agricultural Risk Coverage and Price Loss Coverage.” [Note that projected commodity program spending has risen since February].

On Thursday, the Congressional Budget Office released its estimate of the executive branch agricultural related budget proposals.

And earlier this week, an update at the National Sustainable Agriculture (NSAC) Blog (“Budget Time on Capitol Hill- Farm Bill to be Re-Opened?”) indicated that, “With the new CBO projections as backdrop, the House and Senate Budget Committees plan to markup their respective version of the congressional budget resolution for fiscal year 2016 next week. The budget resolutions will then go to the House and Senate floor, and if passed, will be negotiated into a final budget resolution to guide spending decisions for fiscal year 2016.

“In addition to setting the overall size of the spending pie for annual appropriations bills which dictate government discretionary spending, the budget resolution is occasionally also used to send budget reconciliation instructions to House and Senate authorizing committees with jurisdiction over mandatory spending. Those instructions are in essence directives to cut spending in mandatory-spending programs under a committee’s control by a specific dollar amount. Budget reconciliation is most often used as a procedure for deficit reduction.

According to the Capitol Hill rumor mill, there is a strong possibility that the draft budget resolutions to be introduced by the Budget Committee chairmen next week will include reconciliation instructions and that those instructions may include a directive to the Agriculture Committees to cut farm bill spending by a designated amount. Should that happen, a farm bill that took three years to create and that was signed into law just over a year ago for what was presumed to be a five-year period will be open for debate all over again.”

The NSAC Blog update pointed out that, “A broad coalition of farm, anti-hunger, conservation, and rural groups with a stake in the farm bill, including NSAC, wrote to both budget committees several weeks ago urging them not to re-open the farm bill through the budget reconciliation process. That farm bill coalition will very likely mobilize in opposition to any moves by the Budget Committees to re-open the farm bill.

Whether such moves are forthcoming remain to be seen, though the situation should become clear one way or the other in the coming week. NSAC will work against farm bill reconciliation instructions.”

And earlier this week, a Texas newspaper reported that, “[House Ag Committee Chairman Mike Conaway (R., Tex.)] said Monday that [House Ag Committee] review [of the SNAP program] is underway and that he does not want his fellow legislators to make cuts to the program before he is finished.

“‘I’m trying to maintain this idea that we don’t have any preconceived reforms in mind right this second, and we want to let those percolate out of the review itself,’ Conaway said. ‘One of the fights I’m having with the budget is to make sure they don’t do things there that would taint the water.’”

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Thursday Morning Update: Crop Insurance; Policy; Regulations; Ag Economy; and, Biotech

Crop Insurance- GAO Report

On Wednesday, the Government Accountability Office (GAO) released a report on crop insurance titled, “In Areas with Higher Crop Production Risks, Costs Are Greater, and Premiums May Not Cover Expected Losses.”

A summary and highlights of the report have been posted here, at FarmPolicy.com.

Agri-Pulse reporter Philip Brasher, in an article from yesterday, provided a brief and thorough look at the GAO report.

Mr. Brasher reported that, “Farmers in drought-prone areas of the Plains and other high-risk regions often aren’t being charged enough for crop insurance, according to congressional auditors.”

(more…)

Highlights: GAO Report on Crop Insurance

On Wednesday, the Government Accountability Office (GAO) released a report on crop insurance titled, “In Areas with Higher Crop Production Risks, Costs Are Greater, and Premiums May Not Cover Expected Losses.”

GAO indicated (full report here) that, “The federal government’s crop insurance costs are substantially higher in areas with higher crop production risks (e.g., drought risk) than in other areas. In the higher risk areas, government costs per dollar of crop value for 2005 through 2013 were over two and a half times the costs in other areas. The figure below shows the costs during this period. However, the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA)—the agency that administers the crop insurance program—does not monitor and report on the government’s crop insurance costs in the higher risk areas.”

The report added that, “RMA implemented changes to premium rates in 2014, decreasing some rates and increasing others, but GAO’s analysis of RMA data shows that, for some crops, RMA’s higher risk premium rates may not cover expected losses. RMA made changes to premium rates from 2013 to 2014, but its plans to phase in changes to premium rates over time could have implications for improving actuarial soundness. USDA is required by statute to limit annual increases in premium rates to 20 percent of what the farmer paid for the same coverage in the previous year. However, GAO found that, for higher risk premium rates that required an increase of at least 20 percent to cover expected losses, RMA did not raise these premium rates as high as the law allows to make the rates more actuarially sound. Without sufficient increases to premium rates, where applicable, RMA may not fully cover expected losses and make the rates more actuarially sound. Furthermore, in analyzing data on premium dollars for 2013, GAO found that had RMA’s higher risk premium rates been more actuarially sound, the federal government could have potentially collected tens of millions of dollars in additional premiums.”

The GAO report noted that, “As shown in table 1, the federal government’s crop insurance costs generally increased for fiscal years 2003 through 2013. A widespread drought and crop losses in crop year 2012 contributed to the spike in government costs to $14.1 billion in fiscal year 2012. In crop year 2013, weather conditions were more favorable, so government costs were lower than in fiscal year 2012. According to an April 2014 CBO estimate, for fiscal years 2014 through 2023, program costs are expected to average $8.9 billion annually.”


(Click here for a larger image of Table 1).

The GAO report also noted that, “Figure 1 shows counties organized in groups of 20 percent based on average county target premium rates, with the darker areas representing counties with higher average county target premium rates. The color-shaded counties represent all 2,554 counties that had county target premium rates for at least one of the five major crops.”


(Click here for a larger image of Figure 1).

In addition, GAO noted that, “Figure 2 shows the riskiest 20 percent of counties (510) in terms of average county target premium rates. These 510 higher risk counties are color-shaded on the basis of their 2013 premium dollars to show which counties purchased the most crop insurance. The Great Plains, which has areas with relatively high drought risk, had a large portion of the higher risk counties’ premium dollars.”


(Click here for a larger image of Figure 2).

And, GAO added that, “Figure 3 compares the estimated government crop insurance costs per dollar of expected crop value for the five major crops in the 510 higher risk counties with the costs in the 2,044 other U.S. counties from 2005 through 2013. Total government crop insurance costs vary from year to year depending on weather-caused crop losses, crop prices, and farmers’ decisions about how much insurance coverage to purchase. To control for variations in crop prices and farmers’ purchase decisions, and to normalize the costs for higher risk counties and lower risk counties while still reflecting weather-caused crop losses, we expressed the estimated government costs in relation to expected crop value. As shown in figure 3, the costs in higher risk counties were substantially greater. Over the 9-year time frame, government costs averaged 14 cents per dollar of expected crop value in the higher risk counties and 5 cents per dollar in the other counties. For example, if two farms each had an expected crop value of $1 million, the higher risk farm would have had an average annual government cost of $140,000, and the lower risk farm would have had an average annual government cost of $50,000. In 2013, the higher risk counties had a government cost of 17 cents per $1 of expected crop value, 3 cents higher than the average during the time frame, and the other counties had a government cost of 5 cents per $1 of expected crop value, the same as the time frame average.”


(Click here for a larger image of Fig 3).

The report stated that, “Premium subsidies provided on behalf of farmers are a large component of government crop insurance costs. Figure 4 compares premium subsidies provided on behalf of farmers per dollar of expected crop value in the 510 higher risk counties with the premium subsidies in the 2,044 other counties from 1994 through 2013. Similar to the pattern shown in figure 3, figure 4 shows that premium subsidies in higher risk counties were substantially more than in the other counties. An important distinction between figure 3 and figure 4 is that figure 3 is indicative of differences in weather-related loss claim payments, which vary from year to year, while the measures of premium subsidies in figure 4 do not vary with weather-related loss claim payments and are related to the program design.”


(Click here for a larger image of Fig 4).

In addiiton, the report explained that, “Figures 5 and 6 show, for 1994 through 2013, respectively, farmers’ net gains per dollar of expected crop value and net gains per dollar of premium paid by farmers. If a farmer’s net gain per dollar of premium paid is more than zero, it means the farmer received more in loss claim payments than he or she paid in premiums. As shown in these two figures, farmers’ net gains fluctuated from year to year…During the 20-year time frame, farmers’ net gains from crop insurance averaged 9 cents per $1 of expected crop value in the higher risk counties and 2 cents per $1 of expected crop value in the lower risk counties. In addition, farmers in higher risk counties averaged $1.97 in net gains per $1 of premiums paid compared with net gains averaging $0.87 per $1 of premiums paid for farmers in the lower risk counties over the 20-year time frame.”


(Click here for a larger image of Fig 5).


(Click here for a larger image of Fig 6).

Bringing these figures together, the GAO report indicated that, “Figures 3, 4, 5, and 6 illustrate the extent to which higher risk areas have higher relative government costs, and farmers in those areas receive higher relative benefits. Furthermore, the difference between higher risk counties and lower risk counties in premium subsidies provided on behalf of farmers per dollar of expected crop value in 2013—11 cents per $1 versus 4 cents per $1, respectively, on average—indicates that the government’s crop insurance costs might be reduced for farmers in higher risk counties without denying them sufficient risk protection. Specifically, if farmers in the other counties have sufficient risk protection while receiving premium subsidies of 4 cents per $1 of expected crop value, farmers in the higher risk counties might have sufficient risk protection with premium subsidies of less than 11 cents per $1 of expected crop value.”

The GAO report included two recommendations:

“GAO recommends that RMA (1) monitor and report on crop insurance costs in areas that have higher crop production risks and (2), as appropriate, increase its adjustments of premium rates in these areas by as much as the full 20 percent annually that is allowed by law.

“RMA disagreed with GAO’s first recommendation and agreed with the second. GAO continues to believe that RMA can and should do more to monitor and report on crop insurance costs in higher risk areas, where government costs were found to be substantially higher.”

Philip Brasher reported on Wednesday at Agri-Pulse that, “Farmers in drought-prone areas of the Plains and other high-risk regions often aren’t being charged enough for crop insurance, according to congressional auditors.”

Mr. Brasher explained that, “From 2005 through 2013, government costs averaged 14 cents per dollar of expected crop value in higher-risk counties versus 5 cents per dollar in lower-risk ones, according to GAO. Those differences mean that for two farms, each with an expected crop value of $1 million, it cost the government on average $140,000 to insure a grower in a higher-risk county versus $50,000 in the lower-risk one.

In 2013, the cost gap between higher risk and lower counties was 17 cents versus 5 cents per dollar of crop value.

“RMA challenged some aspects of GAO’s analysis as well as the recommendations. In a letter published as part of the report, RMA Administrator Brandon Willis said that the agency already provided enough cost information and said that the agency had to be cautious about raising rates.”

The Agri-Pulse article noted that, “The American Association of Crop Insurers, which represents companies that provide the coverage, applauded the GAO for what the group called its ‘constructive approach.’

“‘It is important to recall that program costs and rates aren’t necessarily the same thing. That being said, we do have concerns about the level of rates in parts of the program,’ the group said in a statement.

“‘We know that any increases in program costs will only make the crop insurance program a bigger target for its critics.'”

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Des Moines Register- Water Runoff Issues, Conservation- Clean Water Act

Categories: Conservation /Farm Bill

A pair of articles on the front page of Wednesday’s Des Moines Register highlighted water runoff issues and conservation practices taking place in the Hawkeye State. The variables noted in the articles have broader connections in the debate over farm conservation policy development beyond Iowa and also could potentially impact how the Clean Water Act is viewed.

Timothy Meinch reported that, “Des Moines Water Works will file a federal suit against three rural counties in northwest Iowa, an action that could trigger far-reaching effects on how states approach water quality regulation.

“The action follows a 60-day warning that sparked little promise for solving water quality concerns at Water Works, according to utility trustees. The board voted unanimously during a special meeting Tuesday to file a lawsuit against drainage districts in Buena Vista, Calhoun and Sac counties.”

The article explained that, “Water Works officials and a crowd of supportive residents criticized the state’s voluntary nutrient-reduction strategy for farmers. They said it is insufficient for protecting Iowa waterways…[The legal suit] claims drainage districts act as a conduit, channeling fertilizer and manure between farm fields and waterways. Water Works officials said these districts should be regulated with special permits under the Clean Water Act.”

Mr. Meinch added that, “Water Works officials say rising nitrate levels in the Raccoon and Des Moines rivers will soon require a new nitrate removal facility in Des Moines that could cost $80 million to $100 million.”

Also on the front page of today’s paper, Donnelle Eller reported that, “With decades of conservation farming under his belt, Dwight Dial has a hard time understanding why Des Moines Water Works is so intent on suing three northwest Iowa counties for contributing to high nitrates in the Raccoon River, a source of drinking water for roughly 500,000 residents in central Iowa.

“‘We’re not deliberately dumping our nitrogen into the Raccoon or Des Moines river systems,’ said Dial, who raises corn, soybeans and pigs near Lake City in Calhoun County, a target of the Des Moines lawsuit along with Sac and Buena Vista counties.

“‘We’re doing everything we can to retain nutrients in the field for our plants. … But we can’t control Mother Nature.'”

Ms. Eller noted that, “Rural residents say they are unsure what the Des Moines utility sees as the remedy to its high nitrate levels — or why it is suing a few sparsely populated counties that have little power to influence farming operations.

“‘I’ve never heard what Des Moines Water Works thinks the fix is,’ said Tom Smith, who feeds about 3,000 to 4,000 cattle annually and raises 1,300 acres of continuous corn with two brothers southeast of Storm Lake.

“‘If they think we need to use less nitrogen, the (board of) supervisors have no power over that,’ Smith said. ‘They’re going after the wrong people.'”

Today’s Register article stated that, “Des Moines utility leaders have said they hope the lawsuit will lead to new federal regulations on farmers in Iowa, and potentially across the nation.”

Agricultural runoff is now exempt from the federal Clean Water Act. But the utility wants to force farmers to be treated the same as wastewater treatment plants or factories, which must request permits outlining the runoff that leaves their facilities,” Ms. Eller reported.

Today’s article pointed out that, “Farmers say extreme weather, such as recent droughts and flooding, is influencing nitrate loading — something they can’t control.

Still, farmers invested $13 million last year, on top of $9.5 million by the state, on conservation practices such as buffer strips, terraces and cover crops to keep nutrients from getting into Iowa rivers and streams.”

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Wednesday Morning Update: Policy Issues-Ag Economy; Regulations; and, Trade

Policy Issues, Budget Baselines, USDA Reports

Corey Paul reported on Monday at the The Odessa (Tex.) American Online that, “[House Ag Committee Chairman Mike Conaway (R., Tex.)] said when he was appointed chairman in January that his chief priority was launching a review of the country’s Supplemental Nutritional Assistance Program, or food stamps, criticizing a lack of oversight for the $80 billion annual program.

“Conaway said Monday that review is underway and that he does not want his fellow legislators to make cuts to the program before he is finished.

“‘I’m trying to maintain this idea that we don’t have any preconceived reforms in mind right this second, and we want to let those percolate out of the review itself,’ Conaway said. ‘One of the fights I’m having with the budget is to make sure they don’t do things there that would taint the water.’”

Meanwhile, with respect to the commodity title of the Farm Bill, Reuters news reported yesterday that, “Government support for U.S. grain farmers under the new five-year farm bill will peak with the coming 2015 crop, the Food and Agricultural Policy Research Institute said in a new report.”

The article noted that, “‘Payments under 2014 farm bill programs increase when crop prices fall,’ FAPRI said in its 2015 U.S. Baseline Briefing Book. The think tank estimated that $3.9 billion in ARC and PLC payments for last year’s 2014 crop would be made after fiscal 2016 begins on Oct. 1.

“‘ARC spending is greatest in 2015/16 but declines in later years as the moving averages that determine benchmark revenues adjust,’ FAPRI said. ‘Projected average ARC and PLC payments peak with the 2015 crop at about $6.5 billion but decline to $3.4 billion for the 2018 crop.’”

(more…)

Jeb Bush Video: Iowa

Des Moines Register reporter Jason Noble pointed to this recent video from Jeb Bush which highlighted his appearance at the Iowa Ag Summit and agricultural issues.

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Baseline Updates: Corn and Soybean Pricies

University of Illinois agricultural economist John Newton provided a visual look at price projections for corn and soybeans in recently updated baseline analysis from CBO and FAPRI:

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USDA- NASS Crop Condition Updates

On Monday, USDA’s National Agricultural Statistics Service (NASS) office in Texas indicated that, “Producers in South Central, the Upper Coast, and the Southern parts of the state began planting corn. Sorghum planting was active in areas of the Coastal Bend and the Lower Valley. Field preparations for cotton and sorghum continued in areas of the High Plains and Trans-Pecos.”

The report added that, “Livestock began experiencing stress due to wet, cool conditions in areas of East Texas. Supplemental feeding remained active. Range and pasture progressed throughout the state; however, continued cold temperatures began to deteriorate conditions in areas of the Blacklands and the South East.”

The NASS report from Texas noted that 50% of the wheat crop is in good to excellent condition.

The Kansas NASS report stated on Monday that, “Livestock continued to graze crop residue with supplemental feeding reported. Cold temperatures caused livestock producers to increase care. Some producers applied fertilizer for the spring planting season.”

The report added that, “Winter wheat condition rated 3 percent very poor, 10 poor, 41 fair, 43 good, and 3 excellent” and, “Cattle and calf conditions rated 1 percent very poor, 2 poor, 32 fair, 59 good, and 6 excellent.”

And the Oklahoma NASS report noted on Monday that 42% of the winter wheat was in good to excellent condition, and added that, “Conditions of pasture and range were rated mostly fair to good. Livestock conditions were rated mostly good to fair. The snow and freezing temperatures have depleted hay supplies in some areas and stock ponds are getting lower. Many operators were still providing hay and supplemental feed for livestock.”

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Chairman Conaway Comments on SNAP, Budget Issues

Categories: Farm Bill /Nutrition

Corey Paul reported on Monday at the The Odessa (Tex.) American Online that, “[House Ag Committee Chairman Mike Conaway (R., Tex.)] said when he was appointed chairman in January that his chief priority was launching a review of the country’s Supplemental Nutritional Assistance Program, or food stamps, criticizing a lack of oversight for the $80 billion annual program.

“Conaway said Monday that review is underway and that he does not want his fellow legislators to make cuts to the program before he is finished.

“‘I’m trying to maintain this idea that we don’t have any preconceived reforms in mind right this second, and we want to let those percolate out of the review itself,’ Conaway said. ‘One of the fights I’m having with the budget is to make sure they don’t do things there that would taint the water.'”

On February 25, the full House Ag Committee held a hearing on SNAP, overview here; while on February 26, the House Ag Nutrition Subcommittee also heard SNAP related testimony, an overview of that hearing is available here.

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Tuesday Morning Update: Baseline Updates- Policy Issues; Animal Research; Trade; Iowa Ag Summit; and, the Ag Economy

Baseline Updates- Policy Issues

On Monday, the Congressional Budget Office (CBO) released its updated baseline Budget Projections for 2015 to 2025.

A brief overview of CBO’s January baseline projections can be found here.

Also on Monday, the Food and Agricultural Policy Research Institute (FAPRI) released its latest baseline-briefing book.

Both baseline updates showed a change in farm program spending projections from previous baseline reports.

Politico writer David Rogers, and Philip Brasher of Agri-Pulse, separately examined the numbers in greater detail on Monday- details of their reporting can be found at this FarmPolicy.com update from yesterday.

More broadly, yesterday’s FAPRI update stated that, “Lower prices have resulted in a large decline in crop producer income and could result in significant federal spending under new programs established by the 2014 farm bill. After reaching record levels in 2014, most livestock sector prices are also expected to decline in 2015. As a result, net farm income is projected to fall sharply.”

Average projected corn prices recover to $3.89 per bushel for the 2015/16 marketing year in response to reduced U.S. production. Wheat and soybean prices both fall in 2015/16, to $5.17 per bushel and $9.29 per bushel, respectively, given continued large global supplies,” FAPRI said.

In addition, CBO’s outlook for the SNAP program is available here, while the CBO’s outlook for child nutrition programs can be found here.

Meanwhile, Marcia Zarley Taylor reported yesterday at DTN (link requires subscription) that, “U.S. crop farmers have just weeks left to make their five-year farm program decision. For most, the March 31 choice will be narrowed between ARC-County and Production Loss Coverage (PLC). Many corn-soybean growers in the northern Corn Belt see good reason to go with what they call the ‘surer thing’ of ARC payments, DTN interviews have found.

“Even in counties that experienced bumper yields in 2014, growers may face little or no ARC payments in 2014 but still are banking that ARC will outpay PLC for 2015 and beyond. For example, McLean County, Illinois, averaged an amazing 217 bpa corn yield in 2014, so stands to collect no ARC payments, the University of Illinois estimates. However, with a return to average or below average yields in 2015, ARC-County payments could jump to $78/base acre in 2015.”

(more…)

CBO, FAPRI March Baseline Updates

On Monday, the Congressional Budget Office (CBO) released its updated baseline Budget Projections for 2015 to 2025.

A brief overview of CBO’s January baseline projections can be found here.

Also on Monday, the Food and Agricultural Policy Research Institute (FAPRI) released its latest baseline-briefing book.

David Rogers reported on Monday at Politico that, “Fresh projections for the new farm bill Monday show a greater participation rate — and higher costs — associated with a Senate-backed revenue loss program championed by Midwest corn and soybean producers.

“A revised farm baseline prepared by the Congressional Budget Office shows a decided shift in this direction from just months ago. A second report from the Food and Agricultural Policy Research Institute at the University of Missouri projects that the program’s costs will jump by nearly $1.7 billion, or 81 percent, above what FAPRI had previously predicted for the 2015-2016 marketing year.”

Mr. Rogers explained that, “Proponents of the program, formally known as Agricultural Risk Coverage or ARC, argue that it is still more efficient than traditional counter-cyclical, price support programs. And in fact, both the FAPRI and CBO numbers show that the ARC payments to corn farmers will drop off significantly in three to four years.

“Nonetheless, the infusion of so much government money up front is sure to invite criticism. CBO projects that total payments to corn and soybean producers from ARC alone will be $3.37 billion in fiscal 2017 — when the big subsidies come due for the government.

“That is 38 percent higher than what this sector collected in 2014 under the old system of direct cash payments to producers.”

The Politico article pointed out that, “It’s still a bit of a guessing game as to how many farmers will sign up for ARC vs. PLC, but the combined costs in the early years are striking.

“In the case of corn and soybeans, CBO is projecting most producers will go in the direction of ARC, but thousands will opt for PLC instead, accounting for another $1.47 billion in costs in fiscal 2017.

When added to the ARC subsidies, the corn and beans sector is expected then to receive a total of $4.8 billion in government payments in fiscal 2017. That’s nearly double what the direct payments were for these two crops in 2014.”

And Philip Brasher reported on Monday at Agri-Pulse that, “The new farm programs for grain and oilseed growers will pay them up to $7 billion annually over the next few years, surpassing what they would have received through the old system of direct payments, according to new forecasts released Monday.”

After additional analysis of the updated CBO and FAPRI reports, Mr. Brasher pointed out that, “After 2018, ARC payments decline dramatically as the five-year moving average begins to reflect the drop in commodity prices. FAPRI economists estimate that ARC payments will drop from $3.1 billion in fiscal 2018 to $1.8 billion in 2019 and then to $1.2 billion the following year.

PLC payments, on the other hand are expected to peak at $2.8 billion in fiscal 2018 and drop to $2.4 billion the following year, according to FAPRI.

Both CBO and FAPRI estimate that the cost of the federal crop insurance program, which has been expanded with new products under the 2014 farm bill, including a new policy for cotton, will hover around $8 billion a year.”

More broadly, the FAPRI update stated that, “Lower prices have resulted in a large decline in crop producer income and could result in significant federal spending under new programs established by the 2014 farm bill. After reaching record levels in 2014, most livestock sector prices are also expected to decline in 2015. As a result, net farm income is projected to fall sharply.”

Average projected corn prices recover to $3.89 per bushel for the 2015/16 marketing year in response to reduced U.S. production. Wheat and soybean prices both fall in 2015/16, to $5.17 per bushel and $9.29 per bushel, respectively, given continued large global supplies,” FAPRI said.

In addition, CBO’s outlook for the SNAP program is available here, while the CBO’s outlook for child nutrition programs can be found here.

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Clarity Sought in USDA Wetland Determinations- Sen. Heitkamp

Categories: Farm Bill

A news release on Monday from Senate Ag Committee member Heidi Heitkamp (D., N.D.) stated that, “[Sen. Heitkamp] today called on the U.S. Department of Agriculture (USDA) to clarify how it is making offsite wetland determinations on farmers’ land in North Dakota and across the country, and improve certainty for farmers and their operations for the upcoming growing season.

“The Natural Resources Conservation Service’s (NRCS) State Offsite Methods allow it to make wetland determinations without being physically present on farmers’ land. However, its new proposed methods have not provided additional clarity for farmers in how the NRCS conducts this process. Heitkamp pressed USDA Under Secretary for Natural Resources and Environment Robert Bonnie to improve how the NRCS communicates with farmers relating to wetland determinations and conservation compliance, which impact what farmers may do with their land.”

Recall that on February 27, the House Appropriations Subcommittee on Agriculture held a budget hearing and heard testimony from USDA- Natural Resources Conservation Service (NRCS) Chief Jason Weller.

During the discussion portion of this hearing, the issue of remote wetlands determination came up.

Specifically, Rep. David Young (R., Iowa) had the following exchange with Chief Weller:

Rep. David Young: “Last year the NRCS proposed updating the way it conducts wetlands determinations in the prairie pothole states, you know, Minnesota, Iowa, North Dakota, South Dakota. How will the wetland determination proposal affect producers, and when there is a review, will there be an ability for folks to have a second request for review and a second opinion if they disagree with the determination you make?”

Mr. Weller: “Yes. So first starting with what a producer hopefully will experience with us. What we’re proposing is bringing a modern, up-to-date, scientifically driven approach to doing what we’re calling off site determinations. This is a practice we’ve had at NRCS for decades. But what we didn’t have in the prairie pothole region is a consistent approach across all four states. So depending on where your property was, you had a different approach that we needed to update.

“So what this means, though, is actually, at the end of the day, when we implement this—because we were just seeking comments on this approach so far—is better service for a producer. So right now, as you know, there’s been a backlog, particularly in North and South Dakota, but Iowa as well. And in a lot of cases it’s because it’s on site determinations. It takes staff time. When you do an off site determination, you’re using remote sensing technology, you know, photography, LIDAR coverage, other techniques to really do equivalent, if not a more accurate determination approach.

The bottom line is time savings. So the average number of times it takes to do an off site determination is six hours. The average number of hours it takes to do on site is at least 14 hours. Many of them are 40 hours. And that doesn’t count all the driving time. When you break that down in dollars and cents, if you just say, take—you assume 30 bucks an hour for like a field technician to go out and do it, that equates to about 170 bucks to do an off site determination. When you do on site it’s like over $400 a determination, on average.

But when you multiply that over like South Dakota, where they have 2,500 determinations in the backlog, that’s the difference between $300,000 over a million dollars. And when it comes down to that kind of expenditure, when you add that up across four states, you’re talking real money. And that’s money I’d rather employ back in the field to provide, you know, technical assistance to producers as opposed to investing it in a way that we can be more efficient.

“So to your question about what happens for the producer, the first approach would be the off site determinations, which will be much more efficient. They’ll get determinations made quicker. It’s a preliminary determination. If they don’t like the determination, they can then appeal it and they can then request an on site determination.

“If they don’t like the on site determination from the field staff, they can then appeal that to the state office. If they don’t like the state office determination, they can then appeal that to the national appeals division. So there’s absolutely all these protections for a producer. We’re not changing any of that, how that works. We’re actually just trying to streamline it and get the determinations made faster and cheaper.”

Today’s news update from Sen. Heitkamp added that, “Last August, Heitkamp brought Bonnie to North Dakota, calling on him to improve consistency and predictability on wetland determinations and to have him hear firsthand how uncertainty surrounding wetland regulations affects farmers in the state.”

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